How Comparative Advantage can be Comparatively Awful: Why the Trans Pacific Partnership is a Fast Track to Ecological Disaster and Profoundly Undermines Democracy

The Maine Legislature has established a Citizens Trade Policy Commission which has been holding hearings on the Trans Pacific Partnership — a treaty on the fast track for approval, a treaty which is designed to promote the kind of growth that will help make irreversible Climate Change inevitable and will profoundly undermine democracy in Maine and in the US at large. For an elaboration of my reasons for saying this, you can read the remarks that follow which I had the privilege of sharing with the Commission last Thursday evening.

My name is Gray Cox. I grew up in Bar Harbor and teach at College of the Atlantic. I want to start by thanking you for providing this opportunity for us to gather and to speak. This is a dark time of year and in many ways a dark season in which to be living. But it is a delight to come in to this large, spacious, open room that is so full of light and have the opportunity to listen and share our concerns and views. It is the sort of thing we do here in Maine, in town meetings, public hearings, church groups, libraries and all kinds of other settings – come together to care for our communities.

I want to specially make mention of my gratitude for this opportunity tonight because this gathering represents precisely the kind of thing that defines us as Mainers and that threatened by the TPP and its mechanisms for undermining and supplanting our democratic practices in towns and states and even at the federal level.

The issues at stake here cross party lines. They invite us to stop thinking like Republicans and Democrats because of this. We need to think like Americans and Mainers. We have to think in terms of the whole BECAUSE this is a treaty that will change our whole relationship with the Pacific Rim AND, more importantly, with the systems of governance we have developed over the last 400 years in this land. I would like to begin my comments by reaffirming a comment made by Represetnative Sharon Anglin Treat in her December 1 “SUMMARY OF KEY ISSUES IN THE TRANS-PACIFIC PARTNERSHIP (TPP) AGREEMENT” (http://www.maine.gov/legis/opla/CTPCSummaryTPPAnalysisST120115.pdf) . The comment concerns the ways in which the proposed agreement will effectively give up the sovereignty of our federal, state and local governments and pass it on to a system of committees dominated by corporate interests.

As Rep. Treat notes:

“Negotiated in complete secrecy over a period of six years, the 12-country TPP is now in final form and cannot be changed. Congress can only vote to accept or reject it. Nonetheless, this agreement is a “living agreement” that additional countries can join in the future, and will put into place roughly 20 committees to manage trade in agriculture, government procurement, the Internet, food safety, financial regulation, and other topics covered in the deal. Some committees have narrow authority, but others are open-ended in scope. Like the negotiation process that created TPP, many of these ongoing committees, even those dealing with public health and food safety, will be subject to confidentiality provisions that will hamper scientific peer review of their activities and limit public and consumer oversight of their activities. And, unlike a state or federal law that can be repealed when new information comes to light or conditions change, trade agreements require the agreement of all parties to commence negotiations to make changes, which as a practical matter will not occur.”

People who are advocating for this treaty and the transformations it will bring in our governance systems will tell you that it is about three things, three things that frame its importance and value. They will say it is, first, about whether we want to have a rational economic policy that follows modern economic theory in advancing our national economy as a whole by seeking benefits of trade in what is called “comparative advantage”. Second, they will tell you that it is about whether Pacific Rim economies in particular – and the world economy in general – are going to be dominated by the Chinese or by us. Third, they will tell you that it is about whether we want to pursue development as a free market, capitalist society or promote the government regulations and interventions of a socialist society.

Each of these three ways of framing the issue is fundamentally mistaken.

Regarding the first, the theory of comparative advantage, like the Newtonian physics that was believed at the time David Ricardo developed it, holds true in some limited circumstances but not in others – and it most especially does not hold true in our circumstances today.

The basic theory of comparative advantage suggests each country is better off if we each specialize – producing whatever our natural resources, capital and labor best fit us for. But, first, it is crucial to note that the comparative advantages are often to corporations not to average citizens. When the comparative advantage is that they have lower taxes or other costs because they lack health care, education, and workplace safety or because they have less regulation and can freely pollute or because they can bribe officials to grease the wheels of deals and avoid regulative enforcement . . . in these cases, these are only plutocratic, extractive comparative advantages, not democratic, sustainable ones.

The point about sustainability bears emphasis. Monoculture and other forms of specialization for the sake of comparative advantage are only beneficial when and if our over riding national aim is extractive and accumulative. If the aim is sustainability then each country is better off diversifying, and connecting locally, and regenerating and developing good relationships within its borders.

The theory of comparative advantage and the relentless pursuit of economic growth that is coupled with it is designed for an earlier age – a prior age when there was no need to worry about the carbon footprint of transport and the threats of climate change and the destruction of habitat around the world. Amongst the students at the college where I teach, there is enormous concern about climate change and its many implications. These young people are deeply concerned about our common future and the ways in which the issues of climate, now, in Naomi Klein’s memorable phrase, “Change Everything”. They are working here in Maine as well as in Bolivia, India and a host of other sites to develop local farming and alternatives to petrochemical based agriculture, alternatives to fossil fuels, alternative transportation systems, sustainable fisheries, resilient wildlife management, and school programs that provide action based service learning on these issues. And a large group of them has been taking part annually in the climate negotiations which have been dragging on since before they were born and which now, still, in Paris, are leaving us hanging, unsure of whether the negotiators will be able to reach any meaningful agreement. The nations of the world have already agreed that science tells us that meaningful treaty will have to find a way to lead us leave 80% of the carbon fuels we have already discovered unused. We will have to change our economies in a fundamental direction in order to leave those petrochemicals in the ground. Finding a way to do that is a central challenge of our time. And the TPP is designed to encourage long distance economic trade and development that would move us in precisely the opposite direction. For that reason alone it should be opposed.

But sustainability is about much more than just climate. It is about securing the diversity and integrity of our country’s economic system in ways that make it resilient in the face of change. On this score the doctrine of comparative advantage provides a myopic understanding of reality – it holds true only when we look at short run situations in which the basic social and ecological conditions for sustainability are already provided and can be presupposed. In todays turbulent world, are we better off specializing in making only whatever particular items we can make the most money with given the current international market conditions? Are we better off pursuing “comparative advantage” by giving up the ability to be self reliant in the production of food, fuel, and our other necessities – without which we can not survive let alone thrive? Just reframing the issue in these terms lets us hear the voices of Ralph Waldo Emerson, Thomas Jefferson, Sojourner Truth and a crowd of other proud and self reliant forbearers calling out: Self Reliance! We can only hope to survive as ourselves and thrive as ourselves when we do for ourselves! We should not allow any treaty to strip us of our abilities to provide for ourselves come what may. And we should not allow it to leave us naked and powerless to govern ourselves with local, state, and federal policies that promote just such economic security and freedom from dependence on far away suppliers and unstable international markets.

The question is not whether we will sacrifice comparative advantage for special interests of workers or environmentalists. The question is whether we will sacrifice economic security and sustainability for special interests of corporations.

What of the second point — when advocates for the treaty argue that it will help prevent China from dominating the economies of the Pacific Rim and the world? We should reply that the issue is not which country will dominate some region of the world. The question is, which economic system will govern and dominate us. Will it be one of our own making? One we can remake as needed? To adapt to not only to new technologies but new cultural trends, changes in our population, and advances in our moral insight like those that came with Civil Rights in the 60’s, the Women’s movement in the 70’s and the Americans with Disabilities in the 80’s?

As Mainer’s we should not be worried about whether China is selling more objects of plastic, metal and food stuffs in Vietnam than we are. We should be worried about whether we can produce and consume here, in Maine, the kinds of things we think that we and our children should have. Can we make Maine be the way life should be or not? That is the question. What power do we have over our own lives and communities – regardless of who is the top dog, currently, in whatever international trade competition you might care to bet on and speculate about.

And what of the third point in which the advocates for the treaty tell us that it is a question of whether we want to pursue development as a free market, capitalist society or promote the government regulations and interventions of a socialist society? This simplistic contrast between Capitalism vs. Socialism is a false dichotomy. Every economy on this planet is a mixed economy with voluntary exchanges in markets of many different kinds AND with government playing a crucial role in framing the contexts of those markets – the rules of property, the public infrastructure that makes trade and economic growth possible and makes sure it promotes the public well being.

Every society is a mixed economy – a political economy. The question is, will it be controlled by a few or by the many. Our political economy in the United States is increasingly controlled by the few. It is the particular kind of oligarchy classified as a plutocracy – where the few who are most wealthy exercise the most way in how our political economy works. The TPP with outrageously centralized, undemocratic principles and processes for implementing them would push us even further in that very wrong direction.

I would here highlight a later section of the remarks of Rep. Treat refered to before. In the section on on the so called Investor State Dispute Settlement (ISDS) procedures which provide a “A PRIVATE LEGAL SYSTEM JUST FOR CORPORATIONS” she notes:

“The Investor-State Dispute Settlement (ISDS) procedures in TPP are of particular concern. ISDS allows foreign investors the right to sue governments for lost profits caused by regulations in offshore private investment tribunals, bypassing the courts or allowing a “second bite” if the investors do not like the results of domestic court decisions. Policies can be challenged under ISDS even if they apply to both foreign and domestic firms – in other words, even if they do not discriminate against trading partners. ISDS clauses in other trade agreements including NAFTA have been used repeatedly to attack environmental and public health measures. Even unsuccessful challenges take years to resolve, cost millions to defend, and have a chilling effect on the development of new legislation. The cost just for defending a challenged policy in an ISDS forum is $8 million on average; Phillip Morris’s ISDS challenge to Australia’s tobacco regulations has already racked up litigation costs of over $50 million for the Australian government, and the case is still in preliminary stages. • TPP would double the number of corporations that could use ISDS. More than 1,000 additional corporations in TPP nations, which own more than 9,200 subsidiaries in the U.S., could newly launch ISDS cases against the U.S. government. • The “reforms” to ISDS touted by the Obama Administration are largely cosmetic. ISDS tribunals would not meet standards of transparency, consistency or due process common to TPP countries’ domestic legal systems or provide fair, independent or balanced venues for resolving disputes. There is still no appeals mechanism; the arbitration panels would still be staffed by private sector lawyers paid by the hour and allowed to rotate between TPP ISSUES judging and advocating for investors; and problematic “minimum standard of treatment” and “indirect expropriation” language from past trade agreements is largely replicated. • The TPP investment chapter actually expands ISDS liability by widening the scope of domestic policies and government actions that could be challenged: Financial regulations for the first time could be subject to “minimum standard of treatment” claims under the investment chapter. Pharmaceutical firms could demand cash compensation under the investment chapter for claimed violations of World Trade Organization rules on creation, limitation or revocation of intellectual property rights.”

The people of Maine, like those of the rest of America, fought and died in war after war to secure freedom for themselves and others – the freedom to govern themselves, and not be governed by the interests of foreign sovereigns and corporations. The first nations of the Wabnaki who were here first – and our still here now – have cherished the lands and waters of this region and the ways of life they developed here as independent, sovereign communities – and the others who have joined them in living here join them as well in cherishing those same values and seeking to secure them for all who live in this Dawnland of the Americas. The peoples of Maine have worked day in and day out, hard, from one season to another , year after year, down through generations – straining their backs and freezing their butts and pushing themselves hard to make a life for themselves and their children – the way they think life should be – not the way some international rule or corporate lawyer or committee of three in an ISDS thinks it should be. The people of Maine have done their duty paying taxes and going to town meetings and serving on Warrant Committees and wrestling with referenda driving down to Augusta and arguing with friends and working out shared solutions with political opponents in order to fashion a system of governance for our communities and our political economy that suits us and expresses how we think life should be. And if my mother was still alive to have her say about this I am sure that she would say that she would be damned before she would let some TPP come along at tell us how our life should be.

In closing, I want to thank you again for making this hearing possible and for carrying on this tradition of open, public dialogue and democratic discussion and policy making that is so treasured by us in Maine. This is a tradition that is so treasured that we will come to gatherings at the end of long work days, sometimes driving great distances or through harsh weather to get to them, spend hours hearing each other out (even when it is sometimes painful to do so), and spends even more hours talking about it all afterwards and preparing for the next meetings. All of us, regardless of political party, treasure this tradition and the way of life that it has made possible. It makes us who we are. It defines us as people. I want to thank you all for representing it so well and for allowing us to carry it on in this gathering this evening in this open spacious place so full of light. Thank you!

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